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The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy Efficiency Investments

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  • Rodolfo Sejas-Portillo
  • Mirko Moro
  • Till Stowasser

Abstract

Using British data on over 7 million residential property sales, we find that the simplified energy efficiency (EE) information leads to important market effects. UK legislation requires the use of an energy label that shows an EE rating score (1–100) mapped into arbitrary color-coded rating bands (A–G). Applying a regression discontinuity design, we document significant price discontinuities at rating band thresholds, indicating heuristic thinking in the market. These price discontinuities influence market behavior as sellers are more likely to make EE investments if their property is just below a threshold. We discuss policy considerations and avenues for future research.

Suggested Citation

  • Rodolfo Sejas-Portillo & Mirko Moro & Till Stowasser, 2025. "The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy Efficiency Investments," American Economic Journal: Applied Economics, American Economic Association, vol. 17(1), pages 41-89, January.
    • Handle: RePEc:aea:aejapp:v:17:y:2025:i:1:p:41-89
    DOI: 10.1257/app.20220329
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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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